Board skills matrix and capability assessment under the ASX draft 5th edition
A practical implementation note for boards considering how to assess collective skills, knowledge and experience and describe the process and outcome under draft Recommendation 2.2 of the proposed 5th edition of the ASX Corporate Governance Principles and Recommendations.
Draft Recommendation 2.2 proposes that a board determine the collective skills, knowledge and experience it needs, assess whether it has them, and disclose both the assessment process and its outcome.
A board skills matrix remains one possible tool within that assessment.
This note provides a structured pathway from defining capability requirements through assessment, board judgement, response and external disclosure. It also prompts boards to consider how capability is distributed across the board, including concentration, committee reliance and reliance on external advice.
A board may record broad coverage across its capability requirements while remaining materially dependent on a limited number of directors for expertise central to its strategy or risk profile. A useful assessment therefore considers coverage, depth, distribution and where reliance sits across the board and its committees.
That question becomes more important under the draft 5th edition because Recommendation 2.2 asks boards to disclose the outcome of the assessment. The board therefore needs to reach a collective conclusion about its current capability and any governance response arising from that conclusion.
What the note covers
Seven stages of board capability assessment
The implementation note addresses:
- Capability requirements
- Assessment method
- Current capability
- Board judgement
- Response
- Disclosure
- ReviewÂ
The note also includes an illustrative disclosure showing how a board might state its collective conclusion while preserving individual assessment material and commercially sensitive succession information.
Conext
Prepared in connection with the ASX Draft 5th Edition consultation
This implementation note has been prepared in connection with draft Recommendation 2.2 of the proposed 5th edition of the ASX Corporate Governance Principles and Recommendations.
The 5th edition remains in draft. The note should be read in that context and may be updated following publication of the final edition.
Prepared by Liam Brown, Founder, NorthSeat.
This resource provides general governance information. Organisations should consider their own legal, regulatory, constitutional and governance requirements when designing their arrangements.